P&G sets aside reserves in European anti-competition probes

Procter & Gamble Co. has set aside more than $250 million to cover potential liabilities related to investigations into price-fixing and collusion by competition authorities in Europe.

The reserve charge was included in the company’s financial results released on Thursday. It reduced P&G's earnings per share by 9 cents.

Investigations in several other European countries are ongoing, and there could be additional liabilities, P&G officials said. In a conference call with Wall Street analysts, P&G CEO Bob McDonald said the investigations had been previously disclosed in its annual reports.

“It’s too early for us to reasonably estimate the total amount of fines to which the company will be subject as a result of these various competition law issues,” McDonald said. “It’s an industry issue. Many companies are involved.”

Jon Moeller, P&G’s chief financial officer, told analysts the matters being probed are “not recent” and “date back many years.”

The French newspaper LeFigaro reported two years ago that France’s competition council was investigating nine companies, including P&G, for suspected collusion. Unilever, Colgate-Palmolive, Sara Lee Corp., SC Johnson, Germany’s Henkel, and Britain’s Reckitt Benckiser Group were among the others it identified.

Le Figaro reported in February 2008 that the companies could face fines of up to 10 percent of their annual worldwide revenue if they were found guilty.

SC Johnson alleged price-fixing scheme

The suspected violations of French competition laws were believed to have begun in 2004 and surfaced in 2005 when SC Johnson told French authorities about its and others’ involvement, the newspaper said. Nine companies were suspected of participating in “a vast accord on their prices in France,” the newspaper said.

P&G officials in Cincinnati were not immediately available for further comment.

P&G first mentioned the European inquiries in its 2007 annual report on Form 10-K. Its latest annual report, which was filed in August 2009, included the following description of various investigations:

"In July 2006, French authorities, in connection with an inquiry into potential competition law violations in France, entered the premises of two of the company’s French subsidiaries and seized a variety of documents. In April 2008, authorities in the United Kingdom initiated an investigation concerning potential antitrust violations in the U.K. involving one of the company’s subsidiaries. In June 2008, European Commission officials, with the assistance of the national authorities from a variety of countries, started an investigation into potential competition law violations in a variety of countries across the European Union. Around the same time, the national authorities in Spain, Italy and the Czech Republic initiated additional investigations into potential antitrust concerns within those countries. In connection with these investigations, a number of the company’s subsidiaries were visited and documents seized. The company or its subsidiaries are also involved in other competition law investigations in Belgium, Romania, Switzerland, France and Greece, as well as some other countries. We believe that all of the above matters involve a number of other consumer products companies and/or retail customers.

“The company’s policy is to comply with all laws and regulations, including all antitrust and competition laws, and to cooperate with investigations by relevant regulatory authorities, which the company is doing. Competition and antitrust law investigations often continue for several years and, if violations are found, can result in substantial fines. In other industries, fines have amounted to hundreds of millions of dollars. During the fiscal year ended June 30, 2008, certain of the company’s subsidiaries in Germany received a formal complaint alleging violations of the antitrust laws. We are now discussing the situation with the German authorities. At this point, no other formal claims have been made against the company or any of our subsidiaries in connection with any of the above inquiries.

“In response to the actions of the Commission and national authorities, the company has launched its own internal investigations into potential violations of competition laws, some of which are ongoing. The company has identified violations in certain European countries and appropriate actions are being taken. It is still too early for us to reasonably estimate the fines to which the company will be subject as a result of these competition law issues. However, we have taken and will take reserves as appropriate."